Stringent scrutiny of money transfers made by exchange company

Regular or recurring transfers through money exchanges to individuals or establishments and irrespective of the transferred amount, will be strictly scrutinized and may require justification, without which, future transfers could be denied.

Regulatory authorities have recently tightened their oversight of exchange companies to ensure the identification of the actual beneficiary in financial transfers, even for amounts below KD50. The increased regulatory scrutiny of fund transfers from Kuwait is part of the Central Bank of Kuwait’s efforts to combat money laundering and terrorist financing, in line with Financial Action Task Force (FATF) requirements.

The FATF has emphasized the need to enhance regulatory controls on financial transfers to and from Kuwait. This includes verifying customer and beneficiary information, maintaining transaction records, including documents related to completed transactions or attempted transactions for at least five years from the date of transaction, and regularly updating collected data, documents, and information as part of due diligence measures.

Additionally, exchange companies must ensure the accuracy of Financial Control Transactions (FCT) data submitted to the Central Bank of Kuwait, particularly for money transfers to and from Kuwait that meet or exceed KD3,000 (or the equivalent in foreign currency) within a single day.
Furthermore, exchange companies are required to assess the effectiveness of their procedures for reporting suspicious transactions. They must conduct research, investigations, and gather relevant information when there is suspicion that a transaction involves proceeds of crime or is linked to money laundering or terrorist financing. This includes scrutinizing all parties involved and ensuring that the findings of such investigations are documented in writing and retained for reference.

The Central Bank also underscores the importance of applying due diligence measures based on the risk level associated with each customer (low, medium, or high). This is to be verified by reviewing a selected sample of customer files and transactions, with a particular focus on high-risk customers.

Notably, the Central Bank of Kuwait mandates that exchange companies under its supervision engage an audit firm affiliated with an international office to assess their compliance with Law No. 106 of 2013, with special attention paid to unusual transactions or those lacking clear economic justification. This audit process must be conducted semi-annually, with reviews scheduled for June 30 and December 31 each year.

As part of the due diligence procedures followed by exchange companies in processing money transfers, an automated system is used to verify names listed in transaction freezing decisions. These include names on sanction lists issued by the UN Security Council Sanctions Committee, as well as those designated by the local committee formed within the Ministry of Foreign Affairs. This measure aims to ensure compliance with regulations on combating terrorism and preventing the financing of weapons of mass destruction.

Additionally, under regulatory directives, exchange companies are prohibited from providing any financial or related services to individuals, entities, or groups listed in fund-freezing decisions.